The annual cost of not taking advantage of the 3/10,net 30 terms offered by a supplier is (hint: use $1.00 as the invoice amount and a 360-day year):
A)55.7%.
B)45.4%.
C)32.3%.
D)28.2%.

Question

Quizplus · Accepted Answer

The cost of not taking the discount can be calculated using the formula: (Discount % / (1 - Discount %)) * (360 / (Full allowed payment days - Discount days)). For a 3/10, net 30 term, it is (0.03 / 0.97) * (360 / 20) = 0.557 or 55.7%.

The Annual Cost of Not Taking Advantage of the 3/10,net